Does DC Have the Audacity to Pass an Income Tax Increase?

Tax increases, especially for the wealthiest Americans are inevitable. Whoever says we can get out of our current economic mess (both debt and unemployment crises) without raising taxes is wrong.

During an economic downturn, in which governments are failing to raise the revenue necessary to fund crucial programs that help those in need, politicians are finally starting to accept tax increases as part of the solution. Washington, DC’s own Mayor, Vincent Gray, has included tax increases on top of spending cuts in his proposed FY2012 budget.

Will the DC City Council be audacious enough to tax the rich? (Photo by Larry Miller)

There is no question that Mayor Gray’s budget is far from perfect (the drastic cuts in our major poverty alleviation program for families and children, the Temporary Assistance for Needy Families program, also known as TANF, is one that the City Council should reject). However, Gray should be applauded for concretely putting out a proposed tax increase for those making more than $200,000 a year, from 8.5 percent to 8.9 percent. It is a very modest increase that, when combined with Gray’s other tax and fee increases, is projected to raise $127 million.

Even though these tax increases are a step in the right direction to an austerity balanced budget, City Council members seem hesitant to pass them. Council Chair Kwame Brown and Council Member Jack Evans, both Democrats, came out opposing these tax increases without any explanations.

If higher income taxes for the richest Washingtonians are off the table, the City Council’s only way of balancing their budget is by further cutting funding for crucial programs and services for the city’s poorest residents, especially since funding from the Recovery Act will be lost. These programs could range from Social Safety net programs like TANF and mental health services to economic development programs that help local and small businesses. With DC’s unemployment rate hovering around 10 percent, more people are relying on these social safety net programs to help get back on their feet.

It’s also important for small business owners to fight for the survival and full funding of programs like TANF. Even though they don’t directly benefit from these programs, small business owners succeed if and only if there is a strong enough consumption base living in DC that buys their products. If small business owners in DC want their businesses to thrive in the long run, a lower unemployment and poverty rates (18.4 percent) are necessary for a healthy and robust consumption base in the city.

DC residents are welcoming the idea of a budget with tax increases. According to a poll commissioned by the DC Fiscal Policy Institute, 70 percent of respondents said it’s more important to preserve services than to hold down taxes, and 85 percent of respondents are in favor increasing tax rates for individuals who make $200,000 or more. The people have spoken. It’s up to the City Council to give them what they want.